In my recent blog about technology in the accountancy sector, I mentioned how the introduction of cloud technology in the last 10 years has revolutionised the way that accounting firms consider technology, interact with and advise their clients about the use of technology. I think it is fair to say that the legal sector lags a little behind the accountancy world in terms of its digital transformation but there is a rapid digital transformation occurring.
There are several reasons why the legal sector is behind the accountancy sector when it comes to technology. Some of which is down to regulation. The Solicitors Account Rules have only in recent years moved from mandating prescriptive processes to a risk-based approach allowing for the use of tech solutions previously prohibited, for example, using fintech solutions like Shieldpay in favour of a traditional client account. The introduction of alternative business structures which has encouraged legal firms to merge with other professional services businesses or vice versa and this has helped to cross pollinate ideas and open the sector up to new ways to approach technology and client service delivery. Also, in some areas the legal sector has been subject to deregulation which has brought with it an element of competition which has naturally made some practices consider a different approach to stay ahead of new entrants.
Equally, I think there are many similarities with the accountancy sector. Law firms deliver their services in very defined ways, and this has the risk of adopting a “same as last time” approach without challenging the way things are done. In hindsight the accountancy sector was being underserved by their incumbent technology providers for a long time, until they were disrupted by new cloud players. I think the legal sector is equally underserved. The big technology providers for the sector have not really moved with the times failing to adapt to the latest innovations around cloud, open APIs, blockchain etc. This is coupled with the difficulty of connecting into other government organisations and agencies and there have been high profile issues with the Land Registry and access to the courts and case management systems. Finally, there is one other important thing to consider – data security. Often legal firms are dealing with highly confidential, sometimes intimate details regarding their clients and there can often be a well-placed fear that adopting new technologies may place this at risk.
A recent survey undertaken by Legatics, an app founded in 2015 that has funding from Innovate UK to increase the use of AI in legal sector, reported that there were four key pain points that stopped legal firms from adopting more technology in their practices. Those four key areas were:
1. Limited prioritisation of adoption of technology. Often firms could see the value but did not prioritise investment into technology due to a lack of time or ability to step away from client matters.
2. They also flagged a lack of knowledge about technology solutions which meant that partners were reticent to make investments, or to spend the time investigating their options.
3. They identified problems with training and the use of technology solutions. As a result, not maximising the value of solutions that were implemented.
4. There are issues around a lack of role models and leadership from the top in terms of making technology part of the strategic decision-making process.
Legal tech options
So, in recent years the key changes that we have observed for the legal sector had been a move to cloud-based practice management or case management solutions away from desktop or server-based systems such as Leap or Clio. These systems are more flexible in terms of their reporting, time recording, document management and client engagement processes. Their ability to enable remote working without any interruption in working practices has been critical through the pandemic. These solutions make use of digital signatures and client portals for the sharing of documents, for example, help to remove the administrative burden of engaging with clients. The other significant shift that we have noticed, referred to above, is the use of TPMAs such as Shieldpay for managing client bank account transactions transferring the administrative and compliance burden from practices. Trailblazing Tech Comparisons with the accountancy sector? John Toon, Senior Manager, Technical Strategy Lead
Going forward into the future, I am expecting there will be several significant changes or technologies that will become part of the mainstream for the legal sector. Blockchain, for example, often promises (but has failed to deliver convincingly so far) a way to execute and manage contracts in a more secure, effective way than the current processes. Open banking promises to improve the way that lawyers can deal with the transfer of monies, for example conveyancing funds released automatically on completion. One thing that is critically important for many professional service providers relates to client ID and anti-money laundering procedures. Open banking promises much to assist with client identification and the verification of the source of funds, a particular area of weakness that has been flagged by the SRA in the past. In addition to adopting blockchain for contracts the use of machine learning and optical character recognition software is being used to analyse and extract the key details from contracts, potentially flag issues that may have been missed in drafting and also identify areas of potential dispute that may need to be resolved. Finally, I expect that some of the technologies available in the accountancy space will be able to lend themselves to those legal firms that offer similar services, debt collection for example.
There are also challenges and new competition coming into the market. For example, apps like Farewill, will grow over time delivering niche areas of law in a much more scalable way than the traditional model of delivering a face-to-face service. Legal practices need to be aware of these potential challenges to their marketplace and react in an appropriate way.
On the flip-side legal tech can generally improve the service firms offer their clients. This results in deals and matters progressing more smoothly, with less risk and provide services and advice to a higher standard. Given the transactional nature of legal services, in comparison to the accountancy world, improved service is more likely to result in more instructions and positive referrals. One final thing to consider is that there is a move for legal fees to be priced on a fixed basis, rather than on a time basis, so if your technology investments allow services to be delivered more efficiently at lower cost then firms adopting tech improve margins and create more opportunity for investment in further improvements.